But Does It Work?

Outsourcing, and especially offshoring, might provide short-term cost savings, but what about the long term? Some companies might find that savings are offset by customer (and employee) dissatisfaction, miscommunications between inhouse and outside resources, or other factors. A prime example: Last year, Dell returned some offshored jobs to the US after receiving customer complaints about service.

In general, it seems that outsourcing, be it local or offshore, can produce benefits—but not in every situation. Companies need to clear the dollar (or pound or euro) signs out of their eyes and devote a lot of careful analysis and forethought to their goals and their customers' needs before making a decision to outsource. Plus, companies should make sure that they have a backup plan if things don't turn out as expected. Heed the cautionary tale told us by Meir Glantz, a network engineer in the financial sector:

"I am not totally against outsourcing. In certain situations, it's a viable alternative to traditional staffing—for example, to provide an immediate supply of skilled people for short-term projects or to provide expert support for divisions that use proprietary systems or software (e.g., certain areas of network infrastructure). Unfortunately, it's often seen as a panacea for all sorts of budgetary ills, such as waste, mismanagement, and inefficiency. Many companies have narrowed their view to focus solely on the bottom line as the measure of their success. Technology and staff expenses are seen as burdens that need to be shed. The solution? Outsource as much of the staff as possible and delay acquiring equipment as much as possible.

"Granted, in hard times, staff reductions are inevitable. But rather than retain those individuals with the most experience, those people are usually among the first to be dismissed because they often have the highest salaries in the group. A slew of entry-level people are brought in from an outsourcing group and expected to provide the same service \[as previous in-house employees\] for a lot less money. This doesn't work out for two reasons: One, these consultants are thrust into a new environment that they have no familiarity with and are expected to pick up its characteristics and quirks almost immediately. Second, the outsourced staff doesn't have the knowledge or experience that the previous staff had; they're truly entry level and rely on the few experienced \[in-house\] people to train and guide them through day-to-day problems. This slows down problem-solving performance overall and prevents the experienced staff from getting their own work done in a timely fashion.

"\[In my company,\] programming and phone support was farmed out to foreign outsourcing for certain divisions. Customer service (through agents in India) was a disaster \[because of language barriers\]. Slow service and misunderstandings finally generated enough backlash from customers that the foreign agent support was abandoned. The same held true for programmers. There are many talented programmers in India, and the idea \[of sending and receiving\] work over the Internet and communicating through Voice over IP (VoIP) sounded great. Unfortunately, \[much of the\] work was filled with grammatical errors that caused programs to crash, or the original requirements were misunderstood and the work had to be redone. These delays and extra paid hours used up any savings that were initially present so that in the end, the cost was pretty much the same as using domestic help—just with more aggravation.

"This isn't to say that outsourcing is never a viable option. I am sure that there are also tales of success. However, companies need to take a good hard look at the big picture to be sure that the short-term savings don't cost them much more in the long run."